Baby Boomers Worried They Haven't Saved Enough for Retirement

By Andrew Martins, Writer April 9, 2019 01:28 pm EST

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As workers advance in age, the expectation is that they will eventually hang up their careers and settle into their golden years as retirees. To get to that point, however, takes years of financial planning. Without proper preparation, workers may not be able to afford to retire; they may need to continue working well into their 60s and 70s, leaving fewer years to relax after a long career.

An annual study commissioned by the Insured Retirement Institute (IRI) suggests that baby boomers approaching the twilight of their working years feel increasingly anxious about retirement.

According to the survey's findings, 45% of boomers haven't saved toward retirement at all. Of those who have saved for the future, more than half have saved less than $250,000 for retirement.

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Underestimating future costs

Knowing how much something will cost is important when budgeting for anything. Big-ticket items like cars and houses are easier to estimate, since they generally have a widely accepted price range. But how do you prepare for the possibility of something going wrong when you retire? How can you know exactly how much money you'll need?

According to the U.S. Bureau of Labor Statistics, the average amount of Social Security income that a retired couple should expect is approximately $28,000 a year. However, retired Americans ages 65 to 74 regularly spend at least $55,000 a year. Just 30% of the survey's respondents believed they would need $55,000 or more annually in retirement.

One major cost that's certain for retirees is healthcare. According to the survey, it seems baby boomers' expectations don't quite match with reality.

More than 50% of respondents said they believed their healthcare costs would take up 20% of their retirement income. The study cites a HealthView Services report that estimates a "healthy 66-year-old couple will need 48% of their lifetime Social Security benefits to address healthcare expenses." Almost half of the boomers surveyed said they believed Medicare would cover long-term health costs, even though that's just not the case.

Retirement funds and longevity

Along with worries that they hadn't saved enough, boomers are worried that the money they've saved won't last long enough. According to the survey, 80% of respondents said it was either "very important" or "somewhat important" that their retirement income be "guaranteed for life."

That wish is becoming less and less likely, as pensions have become harder to come by. According to a CNN Money report, "the percentage of workers in the private sector whose only retirement account is a defined benefit pension plan is now 4%, down from 60% in the early 1980s." Current trends show that particular benefit continuing to lose favor among employers in the coming years.

One thing that the IRI says boomers can utilize to provide a "protected lifetime income" is annuities. According to their survey, two-thirds of boomers who reported not having an annuity cited "insufficient savings or lack of knowledge" as a reason for not having one.

Respondents who have a financial advisor and/or an annuity felt more confident about their retirement preparedness and were 2-3 times more likely to feel they'd done a good job planning for retirement. They also felt more confident that their retirement "will last at every age milestone from 75 to 90 years."

What boomers can do

Looking forward, IRI said there are several things boomers can do to boost their retirement preparedness confidence:

Save up. Setting aside money for retirement on a monthly basis is paramount. Those eyeing retirement should take advantage of workplace plans, especially if employers match their contributions.

Follow a plan. Hire a financial advisor, if possible, to establish a retirement savings plan.

Chart out expenses. Planning for medical and long-term care costs now, in addition to basic living expenses, can help you avoid any unexpected pitfalls in the future.

Consider an annuity. Rather than leaving your retirement funds entirely up to the stock market, potential retirees should consider purchasing an annuity that will protect funds and become a steady source of income over the years.

Andrew Martins

Andrew Martins is an award-winning journalist with a BA in journalism from Ramapo College of New Jersey. Before joining Business.com and Business News Daily, he wrote for a regional publication and served as the managing editor for six weekly papers that spanned four counties. He is a New Jersey native and a first-generation Portuguese-American, and he has a penchant for the nerdy.